Good sales territory practice

What constitutes good practice when designing sales territories?

When it comes to designing sales territories there’s often more than one way to carve up your geographic sales landscape. In this post Tech4T explores some of the points for consideration and where some of the pitfalls lie.

Start with a clear business objective

Often overlooked, good sales territory design starts with drilling into what the business objectives are for the field sales force.

A sales territory structure is only going to be truly effective if it’s size, shape and opportunity match up with what you’re trying to achieve.

A good example here is to consider how your sales manager’s time is going to be split between prospecting for new business vs. managing existing customer accounts.

This simple equation can help to determine how big a territory needs to be to contain the right level of opportunity to keep the sales manager engaged effectively in a month, quarter or year.

Plotting customers and prospects on a map is a great way to see if a territory contains too many or too few opportunities for a sales manager to handle effectively in a period of time.

Avoid conflict

Healthy competition amongst the sales force can be a good thing as each member strives to out-perform last month’s target.

Territory competition however; can be damaging to a business.

Territory competition occurs where territory boundaries haven’t been clearly defined by the business.

If the boundaries that divide (or unite for the matter) a field sales manager aren’t clear you could find yourself in a situation where your expensive resources are crossing over each other en route to customers and prospects every day.

This criss-crossing round the country reduces the overall efficiency of the sales team. Often where territory boundaries are not defined, a sales rep or manager will be traveling excessive distances in relation to their base location.

A solution would be to clearly define each sales manager’s boundary allowing them to focus their time on driving the shortest possible distance to reach the most amount of target customers and prospects.

In some cases territory conflict is inevitable, particularly for larger field sales teams where different product specialists exist or certain sales managers are aligned to key accounts for example. For this type of field force a defined territory structure will take all of this into consideration together with the rules that govern the ability to travel off patch.

On-patch vs. Off-patch

Businesses change over time, a fact of life is that the front end field force will inevitably change either through staff leaving or entering the company or as a result of an internal re-structure.

Ideally with each change of head or re-structure, part of the change process should include a territory evaluation to ensure that the existing field sales territory structure matches the change.

More often that not sales people are recruited based on talent first and their base location second. If you are a business who has one or more sales managers in close proximity to each other, consider having a territory structure where a sales manager is allowed to live off-patch.

That way the talent is allowed to flourish within the business whilst still maintaining territory integrity.

Owning a socket set doesn’t make us all Formula One mechanics!

The building blocks

In order to create field sales and franchise territories for that matter, many companies use geographic mapping software (GIS). Geographic mapping software creates territories based on “balancing criteria”.

The balancing criteria for territory design are based around setting the key variable that determine territory size and shape. For example territories in the franchise sector are often created using a target Census or demographic variable such as number of households or an age segment.

In the sales arena, typically it’s customer or prospect types. Be wary of trying to set too many balancing criteria and creating a mission impossible for the software. Remember the more conditions applied to a query the smaller the result.

Artificial AI vs. a Human

A common pitfall to avoid is the assumption that a geographic mapping software solution alone can deliver the answer. Sure it helps to have the latest software and cartography available but owning a socket set doesn’t make us all Formula One mechanics.

Good territory design is an iterative process that should secure buy in from sales managers and stakeholders along the way. In order to do that human intervention is required adjusting territory boundaries and balancing criteria rules to suit the sales manager and executive sponsors alike.

From a practical perspective whilst purchasing a piece of software may be a cheap option in the short-term think about total cost of ownership over 3-5 years after factoring in updates, licence renewals, support etc.

Know your customers

By far the single biggest most important factor when considering territories. What do your customers want and need? After all without customers to visit, a sales manager is redundant.

Things to consider here,

• Is the opportunity great enough to warrant a sales manager visiting?
• Are there some customers greater priority than others?
• How often does a sales rep or manager need to visit to secure the first sale or sustain the order profile?
• Do customers have preferences for when and how they like to be seen?
• Where are customers in proximity to one another?
• Can a single journey satisfy multiple customers?

Designing sales territories is an interesting process and one that every sales manager or director should actively encourage.

It affords the business an insight into what is actually happening on the ground visually. Gaps and overlaps in coverage instantly jump off the page. How close customers and prospects are to each other can be seen. Financial information overlaid onto a map shows where the over and under-performing areas are. Much more than can be gleaned from a spread-sheet alone.

A company with clearly defined sales territories based on rigorous analysis and sound logic has every chance to succeed. All that remains is to close the deal.

We hope you found this post useful, please do let us know via our contact form if there’s a particular topic you would like to see explored in relation to any aspect of our services.

For more information on sales territories please see our sales territory design page.